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I've read through the IRS Pub 590, but it doesn't tell us in very clear terms the answer to the question I have in mind:

We are planning to buy our first home in less than five years, and it seems best to set up a traditional IRA (as opposed to a Roth IRA) that allows for early withdrawal without the 10% penalty for the purpose of buying the first home. But we are not sure whether any earnings will nonetheless be subject to income tax.

Please advise. Thanks a lot.
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